Think Tank Calls for Caution Over Strong 2017 Export Figures

Write 2018-02-04

A local think tank has warned against overoptimism regarding last year’s strong performance from South Korean exporters.
The Korea Economic Research Institute(KERI) said Wednesday that a closer look into last year's export performance shows that there were various external factors behind the growth in exports.
The institute first pointed to the fact that a recovery in exports last year only measured up to the level of 2014.
In 2017, South Korean exports grew 15.8 percent from the previous year to a record 574 billion dollars, which is slightly more than what was posted in 2014.
Pundits say last year's sharp growth in outbound shipments was mainly due to a base effect from the minus growth recorded in the two previous years amid a global economic slump.
The KERI also noted that nine out of the country's top 13 export items posted smaller export growth last year compared to 2014. The four exceptions were semiconductors, computers, ships and general machinery.
Also, as South Korea exports a high percentage of raw materials and capital goods, exports rise when global conditions are favorable.
In fact last year, when the global trade volume rose 3.6 percent, Korea's cumulative export growth from January to September reached 18.5 percent, the highest among the world's top ten exporting nations.
There's also the opinion that last year's brisk performance was largely due to higher prices rather than as a result from corporate improvements.
Based on these reasons, the think tank warned against a wholly positive forecast for exports in 2018.
Regarding insecurities, the institute again stressed that higher export prices led to an increased volume and this can work the other way around at any time. This means that when prices drop, exports also decrease.
The strong Korean won and continued high global oil costs are also viewed as factors that can slow export growth. A stronger won hurts the price competitiveness of South Korean products while high oil prices raise production costs.
Also, U.S. safeguard tariffs against washing machine and solar panel imports present a major concern.
The think tank said that Korean exports grew in volume last year but in qualitative terms, prospects are not wholly optimistic.
It advised the government to actively respond to U.S. safeguard measures and urged businesses to continue efforts to diversify their export portfolio.
The government aims to achieve three percent range growth for the second year in 2018 led by exports and domestic demand. For now the goal is considered achievable if risks are adequately dealt with.